The small enterprises in the gems and jewelry sector of Jaipur and the pharma cluster of Ahmedabad are gearing up to reach out to new customers and launch new products
The SME Knowledge Forum organized by DARE in association with ICICI Bank, India’s second largest bank, and technology networking giant Cisco saw passionate debates on issues relating to finance and technology. Indian SMEs are gearing up to make the most of the opportunity but there are many stumbling blocks that are not letting their plans take wings.
In Jaipur, it was all about the difficulty in raising loans from banks. Several participants felt that banks were too reluctant to lend them money and high collateral were only an excuse for not lending. Vivek Kala of Jaipur Jewellers’ Association pointed out that many banks were making borrowings difficult for SMEs by keeping rates on the higher side. He also questioned as to why banks were charging “penalty” for early return of loans? Sanjay Jha of ICICI Bank insisted that no “hidden costs” came as part of the loans given out to small businesses. He stressed the need for having a good credit rating to be eligible for loans and its quick disbursal.
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| (L-R) Anurag Kashyap of Cisco; Vivek Kala of Jewellers' Association of Jaipur; Sanjay Jha of ICICI | Panel discussion at the Jaipur event |
Many small enterprises cannot afford huge collaterals and seek loans based on their annual financial statements but for banks, it becomes problematic because of the fear of incurring bad debt or resultant non-performing assets. Not many SMEs are still aware of the benefits of Credit Guarantee Fund Trust for Micro, Small and Medium Enterprises (CGTMSE). This is the government’s scheme that takes care of the collateral part wherein the Credit Guarantee Trust offers in writing to the lending banks that in case its MSME borrower defaults on its loan, the recovery would be done from the CGTMSE and not the business units. However, many at the DARE events have talked of the difficulty in availing benefits from these schemes.
Similar issue of collaterals came up in Ahmedabad where some senior members of the pharmaceuticals and chemical associations talked of the reluctance on part of the banks to reach out to their potential SME borrowers. A member of Indian Drug Manufacturers Association pointed out that SIDBI sat on a multi-crore fund for disbursal of loans for years only because not many pharma sector units could offer high collateral to avail the loans, although they worked out an innovative way to deal with the situation. The SMEs in Gujarat approached SIDBI through their local banks wherein they acted partly as guarantors to the borrowing units and were able to raise funds from the country’s leading lender to the SME sector.
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| Participants at the Jaipur event | Participants at the Ahmedabad event |
On the technology side, many SMEs at the events still considered technology to be a “jargon” looking for ways to avoid its use. While “high cost” was on the top of the minds of many a entrepreneurs, it was also about getting their workers to use it that made it difficult for them to invest in technology hardware and software. In Jaipur, for instance, security tops the mind of several businesses in the gems and jewelry sector, and video cameras have come in handy for them. There was a keen interest from many entrepreneurs to know how quickly and seamlessly they can connect with their customers overseas. Many SMEs in the gems and jewelry sector in Jaipur are now exporting to countries across the world and wanted to know if they could showcase their products sitting in the comfort of their offices. Anurag Krishna of Cisco pointed out that a range of networking products could keep them in touch with their workforce and customers while on the move.
In Ahmedabad, Dhiren Vyas of Mann Pharma pointed out that technology could be a big enabler for small units in the pharmaceutical sector to keep in touch with the employees on the ground such as medical representatives. Although he did admit that it was all about the mindset change, as many employees would take time to adopt a new technology. Chetan Sabnis and Devesh Sood of Cisco highlighted the need for networking for SMEs in the fast changing global business scenario.
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